The proposed sale of Polaris Financial Technology’s IT services business is unlikely to take place with concerns over valuation of the unit coupled with new strategic plans of the promoter. The IT services business division of Polaris had sought a valuation in excess of $400 million, which was considered by the various bidders as being on the higher side, sources told FE.

The sale process had evinced interest from other Indian IT companies such as Infosys, L&T Infotech, Tech Mahindra and HCL Technologies. Sources said that the valuation was on the higher side as the unit had generated a revenue of $340 million with a operating profit of $45 million. In the current market conditions it would be difficult to justify the payment for such valuations, they added.

The key highlight of Polaris’ IT business is the presence of Citigroup as the anchor client. The global financial giant has around 19% stake in Polaris and is the largest provider of the outsourcing contracts. The bidders during their early discussions had sought for certain guarantee of business coming in from Citigroup after the sale process was done, but no such commitment was given.

In response to an e-mail query sent by FE, a company spokesperson said, “As a policy, the company does not comment on information that is speculative in nature.” Last month, Polaris Financial Technology had said it has no plans to sell its services business. “Our service business is not up for grabs,” Arun Jain, founder chairman and CEO of Polaris, had said, adding, “Whenever we announced restructuring, we could see such speculation.” Despite this, the market was rife with talks that the deal would still go through.

This changed plan is also being attributed to the new strategic intent of Polaris. The company had recently announced its restructuring plans and appointed five CEOs for different portfolios to ensure that they grow proportionately.

In January 2013, the board had authorised the management to explore options that would provide an impetus for the next stage of its growth and maximise shareholder value. A task force was set up, led by Jaideep Billa and comprising Natarajan Narayanasamy (Nat), Anil Verma, and Rajesh Saxena. The board prescribed a 90-day mandate for recommendations along with inputs from the Boston Consulting Group (BCG).

Last month the company opened a new design centre at Navalur near Chennai with an investment of $10 million and during the occasion, Jain